Philippines
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Arbitration in the Philippines
Arbitration in the Philippines is governed by three main pieces of legislation: the New Civil Code (RA 386), the Arbitration Law of 1953 (RA 876), and the Alternative Dispute Resolution Act of 2004 (RA 9285). Construction is specifically governed by the Construction Industry Arbitration Law of 1985 (EO 1008). Arbitration in the Philippines is also governed by the Special Rules of Court on Alternative Dispute Resolution [1] and Department of Justice (DOJ), [2] promulgated by the Supreme Court and the Department of Justice, respectively, all of which underscore state policy in favor of arbitration. [3]
The state support accorded to arbitration is further highlighted by the state policy of implementing the competence-competence principle, which accords to the arbitral tribunal the first opportunity or competence to rule on the issue of its own jurisdiction to decide a dispute submitted to it for decision, including any objection with respect to the existence or validity of the arbitration agreement. Courts are even mandated to exercise judicial restraint and defer to the arbitral tribunal in ruling on such issues. [4] This is in line with the state policy to respect party autonomy, with the greatest cooperation and least intervention from the courts. [5] To this end, court intervention is limited by RA 9285 [6] and the Special ADR Rules [7] in very specific instances. Where the parties have agreed to submit their dispute to arbitration, courts shall refer the parties to arbitration bearing in mind that such arbitration agreement is the law between the parties and that they are expected to abide by it in good faith. [8]
The state policy favouring arbitration, notwithstanding, there are a few matters that cannot be subject to arbitration in the Philippine setting:
- labour disputes covered by the Philippine Labor Code;
- civil status of persons;
- validity of marriage;
- any grounds for legal separation;
- jurisdiction of courts;
- future legitime;
- criminal liability,
- future support; and
- those which by law cannot be compromised. [9]
Commencing an arbitration proceeding
The principle of party autonomy empowers the parties to agree on the rules governing the arbitral proceedings. In its absence, domestic arbitration proceedings are commenced by the serving of a demand for arbitration by either party upon the other. [10] Similarly, international arbitration is commenced by sending a request for the referral of a dispute to arbitration. [11]
In conformity with the state’s pro-arbitration policy, where a party fails, neglects or refuses to perform an agreement for arbitration, the aggrieved party may secure a court order directing the parties to proceed to arbitration in accordance with the terms of the agreement. [12] In contrast, no such mechanism appears to be available in international arbitration. Rather, the rules on waiver [13] and default, [14] which allow the continuation of the arbitral proceedings in the absence of a party provided that due notice has been given, shall apply.
Court action in breach of an arbitration agreement
Consistent with the pro-arbitration state policy, a party in a pending action in violation of an arbitration agreement can request the court to refer the parties to arbitration in accordance with such agreement. [15] Where such a request for referral to arbitration is made, the courts shall refer the parties to arbitration, subject only to a finding that the agreement is null and void, inoperative or incapable of being performed. [16] In such a case, the suit or proceeding before the court shall be stayed. [17] Thus, in one case, the parties were referred to arbitration upon elevation of the case before the Supreme Court, notwithstanding the conduct of trial on the merits by the trial court. In that case, the court emphasised that since the petitioner filed a complaint without prior recourse to arbitration, the proper procedure to enable the Construction Industry Arbitration Commission (CIAC) to decide on the dispute is to request the stay or suspension of such action, as provided under RA 876. [18]
Should a party to an arbitration agreement question the existence, validity and enforceability of the arbitration agreement, judicial relief may be sought prior to the commencement of the arbitration. [19] The filing of such petition does not prevent the commencement of arbitral proceedings [20] and requires the courts to make no more than a prima facie determination of that issue. [21]
While the rules provide for judicial relief even in cases where an arbitration proceeding has been commenced and the arbitral tribunal has ruled upon a preliminary question on jurisdiction, [22] this does not seem to be at odds with the competence-competence principle. The Special ADR Rules itself require the courts to exercise judicial restraint and defer to the competence or jurisdiction of the arbitral tribunal by allowing the tribunal the first opportunity to rule on such issues. [23] Moreover, the rules implement a no injunction policy such that judicial recourse to the court shall not prevent the arbitral tribunal from continuing the proceedings and rendering its award. In fact, courts are mandated not to enjoin the arbitration proceedings during the pendency of the action. [24]
Selection of and challenge to arbitrators
Party autonomy also extends to the parties’ selection and challenge to arbitrators, subject to a few restrictions concerning arbitrator qualifications [25] and the prohibition against any clause giving a party the power to choose more arbitrators than the other. [26]
Where the parties have agreed to submit their dispute to institutional arbitration rules, and unless they agree otherwise, the institution’s arbitration rules for the selection and appointment of arbitrators shall be followed. In ad hoc arbitration, and absent the parties’ agreement on the selection and appointment of arbitrators, the default appointment shall be made by the national president of the Integrated Bar of the Philippines or his or her duly authorised representative. [27]
This rule appears to have modified the rule in section 8 of RA 876, providing for the role of courts in the appointment of arbitrators in domestic arbitration in the absence of the parties’ agreement. As it now stands, courts shall act, as appointing authority, only on specified grounds. [28]
If an appointed arbitrator does not possess qualifications or circumstances exist that give rise to justifiable doubts as to an arbitrator’s impartiality or independence, a party may challenge the appointment of an arbitrator. [29] It bears noting that judicial recourse in challenging the appointment of an arbitrator may only be had when such appointing authority fails or refuses to act on the challenge within the proper period. [30]
In the event of an arbitrator’s failure or impossibility to act, or for other reasons, acts with undue delay, the arbitrator’s mandate shall terminate upon his or her withdrawal or upon the parties’ agreement on the termination. [31] As with the other remedies provided under the Special ADR Rules, the termination of the mandate of an arbitrator in the aforementioned circumstances may only be sought upon the appointing authority’s failure or refusal to decide the matter within the proper period. [32]
Interim measures
Pursuant to the Model Law [33] and RA 9285, [34] requests for interim measure of protection before a court is not incompatible with an arbitration agreement. In Transfield Philippines, Inc v Luzon Hydro Corporation, [35] the Supreme Court explicitly recognised that the pendency of an arbitral proceeding does not foreclose resort to the courts for provisional reliefs.
In such cases, or where the arbitration proceedings have been initiated, requests for interim measures of protection or modification thereof may only be made and acted upon by the court to the extent that the arbitral tribunal has no power to act on any such interim measure, or is unable to act effectively, [36] or for assistance in implementing or enforcing an interim measure ordered by an arbitral tribunal. [37] In addition to the grounds for the grant of interim measures of protection by courts, [38] an arbitral tribunal may order any party to take such interim measure of protection as it may consider necessary in respect of the subject-matter of the dispute. It may also require any party to provide appropriate security in connection with such measure. [39]
On the other hand, relief for interim measure shall be granted by the courts to prevent irreparable loss or injury, to provide security for the performance of any obligation, to produce or preserve any evidence, or to compel any other appropriate act or omission. [40]
On this score, it is observed that deference is afforded to the tribunal in respect of granting or denying measures of protection. The Philippine procedural rules provide not only for deferral of court action on any pending petition for an interim measure where a tribunal has been constituted, [41] but it also provides that court orders granting or denying interim measures of protection may be subject to the arbitral tribunal’s subsequent grant, modification, amendment, revision or revocation. In fact, an interim measure of protection issued by the arbitral tribunal shall, upon its issuance, be deemed to have ipso jure modified, amended, revised or revoked an interim measure of protection previously issued by the court in case of inconsistencies between the two, [42] and any such inconsistency is within the authority of the arbitral tribunal to decide. [43]
Conduct of proceedings
The parties are free to agree on the procedure to be followed. Without any agreement, the arbitral tribunal may conduct arbitration in the manner it considers appropriate. [44] The power conferred upon the tribunal includes the power to determine the admissibility, relevance, materiality and weight of any evidence. [45]
R.A. 876 confers upon arbitrators in domestic arbitration the power to require any person to attend a hearing as a witness and to subpoena documents, when the relevancy of the testimony and the materiality thereof has been demonstrated to the arbitrators. [46] The same provision grants arbitrators the power at any time, before rendering the award, to safeguard and/or conserve any matter which is the subject of the dispute in arbitration. In addition, arbitrators in domestic arbitration are empowered to require parties to produce such additional evidence as the arbitrators shall deem necessary to an understanding and determination of the dispute. [47]
In all of these, the parties’ fundamental right to equality of treatment and full opportunity to present its case remain both in domestic and foreign arbitration. [48]
Issuance of arbitral awards
The law prescribes the form and contents of the award for domestic arbitration. The award must be made in writing and signed and acknowledged by the sole arbitrator or by a majority of the arbitrators, if there is more than one. [49] This same rule applies in foreign arbitrations, [50] with the additional requirement that the reason for any omitted signature is stated and that reasons upon which the award is based is stated. The statement of reasons may be dispensed with upon the parties’ agreement.
In the event of a settlement between the parties, the settlement shall be recorded in the form of an arbitral award on agreed terms following the form prescribed for arbitral awards. [51] Parties to a domestic arbitration may also request that such settlement be embodied in an award which shall be signed by the arbitrators. [52]
Post-award proceedings
In Philippine jurisdiction, different rules govern the recognition and enforcement depending on the nature of the arbitral award, that is, whether the award is domestic or international. International commercial arbitral awards are classified into international commercial awards made in the Philippines and foreign arbitral awards. Thus, it is necessary to characterise an award to determine which specific procedural rules govern its recognition and enforcement.
Domestic arbitration [53]
Under RA 9285, domestic arbitration shall continue to be governed by RA 876. Further, RA 9285 incorporates, by specific reference, certain provisions of the Model Law that likewise apply to domestic arbitration. [54] Under RA 876, any party to the controversy may apply for an order confirming the domestic arbitral award ‘at any time within one month after the award is made’. [55] It is curious to note, however, that under the Special ADR Rules, a petition to confirm a domestic arbitral award may be filed ‘at any time after the lapse of 30 days from receipt of the arbitral award’. [56]
A party may also petition the court to correct or modify the award, which must be filed ‘not later than 30 days from receipt of the arbitral award’. [57] Such petition to correct may be included as part of a petition to confirm the arbitral award or as a petition to confirm that award. [58] The court may correct and modify or order the arbitral tribunal to correct and modify the arbitral award in any of the cases mentioned in the Special ADR Rules. [59]
A few points stand out as regards petitions to correct or modify. First, the Special ADR Rules provide for an additional ground not found in RA 876: where the arbitrators have omitted to resolve an issue submitted to them for resolution. Second, it is worth mentioning that the Special ADR Rules allow the court to ‘order’ the arbitral tribunal to correct and modify the arbitral award.
The petition to vacate a domestic arbitral award may be filed in opposition to a petition to confirm the arbitral award [60] or it may be filed ahead of any petition to confirm. [61] In the latter case, the petition to confirm the arbitral award must be filed, by way of opposition, to such petition to vacate. Otherwise, the petition to confirm is vulnerable to a dismissal for violating the rule on forum shopping, unless the court allows consolidation. [62] The same rule applies in case a petition to confirm is filed ahead of a petition to vacate.
In all instances, a petition to vacate shall be filed ‘not later than 30 days from receipt of the arbitral award’ [63] and any petition filed beyond the 30-day period shall be dismissed. [64] The dismissal, however, of any petition to vacate filed beyond the reglementary period shall not result in the dismissal of the petition to confirm filed by way of opposition. [65]
The grounds to vacate a domestic arbitral award under RA 876 [66] and Special ADR Rules [67] differ from the grounds to set aside an arbitral award under Model Law. [68] There seems to be no inconsistency since the Special ADR Rules provide that the grounds under the Model Law can be invoked to vacate a domestic arbitral award. [69] In deciding the petition to vacate the arbitral award, the court shall disregard any other ground other not mentioned [70] except on grounds of public policy. [71]
The court shall not vacate the award of the arbitral tribunal merely on the ground that the arbitral tribunal committed errors of fact, of law or of fact and law, as the court cannot substitute its judgment for that of the arbitral tribunal. [72] Further, it should be noted that the failure of the tribunal to rule on matters submitted for their resolution is not a ground to vacate a domestic arbitral award. Rather, it is a ground to correct and modify a domestic arbitral award.
Arbitration of construction disputes
Once a final award has been rendered in an arbitration of construction disputes, any party may file a motion to correct the final award within 15 days from receipt upon any of the grounds [73] enumerated in the Revised Rules of Procedure Governing CIAC Arbitration (Revised CIAC Rules of Procedure).
A final award rendered by the CIAC shall become executory upon the lapse of 15 days from receipt thereof by the parties [74] and need not be confirmed by the regional trial court, as provided under EO No. 1008. [75] However, a petition for review from a final award may be taken [76] on ‘questions of fact, of law, or mixed questions of fact and law’. [77] Notably, these grounds are not available to challenge domestic or international commercial awards. Further, the petition for review shall not stay the execution of the final award, unless the Court of Appeals directs otherwise. [78] Should it direct the stay of execution of an arbitral award, the posting of a bond in an amount equal to the award is required.
Once the final award becomes executory, the arbitral tribunal or its surviving members, shall upon motion of the prevailing party issue a writ of execution. If there are no remaining or surviving appointed arbitrators, the CIAC shall issue the awaited writ [79] and the release of the writ of execution is purely ministerial. [80] It should be noted that unlike domestic arbitral awards, where filing a petition before the court is necessary, the Revised CIAC Rules of Procedure provide that the motion should be filed with the arbitral tribunal.
International Commercial Arbitration in the Philippines
Any party to an international commercial arbitration in the Philippines may petition the court [81] to recognise and enforce or set aside an arbitral award. [82]
Under the Model Law, any party, with notice to the other party, may request the arbitral tribunal to correct, interpret a specific point or part of an arbitral award, [83] or make an additional [84] award. The request for interpretation and making of an additional award requires the parties’ agreement. In contrast, the remedy of requesting for an interpretation is unavailable to domestic arbitration. Moreover, requesting an additional award is a ground to correct and modify an arbitral award under domestic arbitration.
Unlike the 30-day time bar in domestic arbitration, the petition for recognition and enforcement of an international commercial arbitral award may be filed anytime from receipt of the award. If, however, a petition to set aside an arbitral award is filed, the opposing party must file the petition for recognition and enforcement in opposition to the petition to set aside within 15 days from receipt thereof. [85]
Noticeably, a petition to set aside may also be filed ahead of a petition to recognise and enforce in international commercial arbitration. The period to file such petition to set aside is slightly longer as the Special ADR Rules allow the party to file such petition within three months from the time the petitioner receives his or her copy. A petition to set aside can no longer be filed after the lapse of the three month period. [86] Failure to file such petition shall preclude a party from raising grounds to resist enforcement of the award.
The grounds to set aside or resist enforcement under the Special ADR Rules [87] are a replication of the same grounds provided under the Model Law. [88] In the same vein, courts shall disregard any other ground to set aside or enforce the arbitral award other than those enumerated, [89] except if the ground amounts to a violation of public policy. [90] The court shall not set aside the award of the arbitral tribunal merely on the ground that the arbitral tribunal committed errors of fact, of law or of fact and law, as the court cannot substitute its judgment for that of the arbitral tribunal. [91]
International commercial arbitration outside the Philippines
The recognition and enforcement of foreign arbitral awards shall be governed by the New York Convention and the ADR Rules. [92] At any time after receipt of a foreign arbitral award, [93] any party to a foreign arbitration may petition the court to recognise and enforce a foreign arbitral award. [94] While there is no time bar as to petitions to recognise and enforce foreign arbitral awards, laches may apply should the petition be filed for an unexplained and unreasonable length of time. Thus, it may be wise to file any such petition within a reasonable period of time in order to foreclose any challenge based on laches.
It is important for the applicant to establish that the country in which the foreign arbitral award was made is a party to the New York Convention. [95] This particular fact is important since a convention award [96] is recognised and enforced in accordance with the New York Convention and the ADR Rules. On the other hand, a non-convention award [97] shall be recognised and enforced in either two ways. The court may recognise and enforce a non-convention award as if it were a convention award when such country extends comity and reciprocity to awards made in the Philippines. [98] If that country does not extend comity and reciprocity to awards made in the Philippines, a non-convention award shall be enforced as a foreign judgment under the Philippine Rules of Court. [99] This distinction plays a significant role as the rules applicable dictate the grounds available to challenge such arbitral award. This will be discussed in further detail below.
Unlike domestic arbitral awards and international commercial awards made in the Philippines, courts have no power to vacate or set aside a foreign arbitral award. [100] A foreign arbitral award may, instead, be refused recognition and enforcement on any of the grounds mentioned in the Special ADR Rules. [101] The grounds to refusing recognition and enforcement under the New York Convention are the same as the grounds enumerated under the Special ADR Rules. Moreover, there is no provision under the ADR Act of 2004 or Special ADR Rules that authorise the filing of a petition to refuse recognition and enforcement ahead of any petition to recognise and enforce a foreign arbitral award. Any such application to refuse recognition and enforcement may be done only by way of opposition to a petition for recognition and enforcement. [102] Similarly, the public policy defence is available to oppose the recognition and enforcement of a foreign arbitral award. [103]
A foreign arbitral award, when confirmed by a court of a foreign country or by a Philippine court, shall be enforced as such and not as a judgment of a foreign court. [104] This distinction is material in that a foreign arbitral award may not be refused recognition and enforcement on the ground of a clear mistake of law or fact. In fact, courts are mandated not to disturb the arbitral tribunal’s determination of facts and interpretation of law. [105] On the other hand, a foreign judgment, under section 48, rule 39 of the Philippine Rules of Court, may be repelled by evidence of ‘clear mistake of law or fact’. In this sense, therefore, foreign arbitral awards are more difficult to resist enforcement as they can only be challenged on narrow grounds that do not include a ‘clear mistake of law or fact’.
In resolving the petition for recognition and enforcement, the court shall either recognise and enforce the foreign arbitral award or refuse to recognise and enforce. The court shall not disturb the arbitral tribunal’s determination of facts and interpretation of law. The ruling is such since it is presumed that a foreign arbitral award was made and released in due course of arbitration and is subject to enforcement by the court, unless a ground to refuse recognition or enforcement is fully established. The decision of the court recognising and enforcing a foreign arbitral award is immediately executory.
Judicial review under Special ADR Rules
An agreement to refer a dispute to arbitration shall mean that the arbitral award shall be final and binding. Consequently, a party to an arbitration is precluded from filing an appeal or a petition for certiorari questioning the merits of an arbitral award. [106] Appellate courts, however, are not precluded from ruling on the decision of the trial courts. The remedy of an appeal through a petition for review or the remedy of a special civil action of certiorari from a decision of the regional trial court shall be allowed in the instances and instituted only in the manner as provided under the Special ADR Rules. [107]
In Chung Fu Industries v Court of Appeals, [108] the Supreme Court held that, where the parties agree that the decision of the arbitrator shall be final and unappealable, the subject arbitration is not necessarily beyond the ambit of the court’s power of judicial review. Chung Fu Industries further held that should the courts refuse or neglect to inquire into the factual milieu of an arbitrator’s award to determine whether it is in accordance with the law or scope of its authority, the proper remedy is certiorari. Such action, however, will lie only where a grave abuse of discretion or an act without or in excess of jurisdiction on the part of the arbitrator is clearly shown. The court will not engage in a review of the facts and determination of the law as applied ‘unless the supposed errors of fact or law are so patent and gross and prejudicial as to amount to a grave abuse of discretion or an exces de pouvoir on the part of the arbitrator’.
In view of the presumption [109] enjoyed by arbitral awards, courts are commanded to vacate or set aside the decision of an arbitral tribunal only upon a clear showing that the award suffers from any of the grounds provided. Courts should not entertain any ground other than those provided except if the same amounts to a violation of public policy. [110] The court shall not disturb the arbitral tribunal’s determination of facts and interpretation of law. [111]
The decisions of the regional trial courts may be appealed to the Court of Appeals and may even reach the Supreme Court, albeit on very limited grounds. In order to dissuade a losing party from raising groundless appeals to frustrate the execution of an arbitral award, the Special ADR Rules require the party appealing from the decision of the regional trial court to post a bond. Otherwise, such failure shall be a cause for the dismissal of the petition. [112]
Moreover, a review by the Supreme Court is not a matter of right, but of sound judicial discretion, which shall be granted only for serious and compelling reasons resulting in grave prejudice to the aggrieved party. [113]
Challenges to arbitration in the Philippines
Practising arbitration practice in the Philippines is not without its challenges. For one, the legal framework for judicial review, while limited only to narrow grounds, may pose a challenge since losing parties can challenge the confirmation, recognition and enforcement of arbitral awards filed by prevailing parties all the way up to the Supreme Court. While courts cannot delve into the merits of an arbitral award and substitute their own judgment as regards the findings of fact, and interpretation and application of law, the tedious process of litigating an enforcement claim all the way up to the Supreme Court means that actual enforcement and execution might take longer than expected. In certain cases, the Court of Appeals, in its discretion, may even order the stay the execution of a foreign arbitral award. [114] Prevailing parties seeking enforcement can, however, find solace in the fact that a party appealing from the decision of the regional trial court is required to post a bond in an amount equal to the arbitral award. The comfort afforded by such provision, however, is lost when the enforcement claim is against the state since the state, its agencies and instrumentalities are exempt from paying legal fees under the Special ADR Rules. [115] The other challenges against enforcing against the state will be dealt in further detail below.
As discussed above, arbitral awards are subject to challenge on very narrow grounds. Should arbitral tribunals decide on a matter submitted for its resolution under its mistaken appreciation of the facts of the case and the relevant laws applicable to the dispute, the parties are precluded from questioning such arbitral award for being erroneous. Except when the error committed is so egregious and harmful to a party as to amount to an undeniable excess of jurisdiction, [116] the Supreme Court will not disturb the findings of an arbitral tribunal even when the award contains an erroneous interpretation of the law. The Supreme Court has noted that ‘because arbitrators do not necessarily have a background in law, they cannot be expected to have the legal mastery of a magistrate. There is a greater risk that an arbitrator might misapply the law or misappreciate the facts en route to an erroneous decision. This risk of error is compounded by the absence of an effective appeal mechanism.’ [117] This poses a challenge as well to arbitration practice in the Philippines as parties might be hesitant to agree to submit their disputes to arbitrators, in view of the inherent ‘gamble’ attached to such proceedings.
The availability of the ‘public policy defence’ to challenge an arbitral awards presents yet another intriguing question. As to what constitutes public policy as a ground to challenge an arbitral award, there is a paucity of rulings on the matter. The lack of case law defining public policy as a ground to challenge an arbitral award gives courts considerable leeway to determine what constitutes a legitimate public policy defence. However, this trepidation appears to have been already addressed in light of the recent pronouncement of the Supreme Court.
In Mabuhay Holdings Corporation v Sembcorp Logistics Limited,118 the Supreme Court adopted a narrow and restrictive approach in defining public policy. In Mabuhay, a dispute arose regarding the joint venture of two corporations. Mabuhay argued that a contractual stipulation in its agreement with Sembcorp violated Philippine laws on partnership. The sole arbitrator ruled against Mabuhay and ordered a payment to Sembcorp with interest of 12 per cent from the date of the final award. The regional trial court refused to recognise and enforce the arbitral award for being contrary to Philippine laws on partnership and interest. Ergo, the trial court ruled that to enforce the final award would be contrary to public policy. The Court of Appeals reversed the ruling of the regional trial court, which prompted Mabuhay to elevate the case before the Supreme Court.
The Supreme Court ruled that the ‘restrictive approach to public policy necessarily implies that not all violations of the law may be deemed contrary to public policy’. The Supreme Court further ruled that it is not uncommon for the courts in contracting states of the New York Convention to enforce awards that does not conform to their domestic laws. While the Supreme Court ruled that the stipulation did not violate Philippine law on partnership, it stated that the enforcement of an award that supposedly violates Philippine partnership law would not amount to a violation of public policy. As regards the contention that the imposition of 12 per cent interest was contrary to law and again, violated public policy, the Supreme Court ruled that ‘mere incompatibility of a foreign arbitral award with domestic mandatory rules on interest rates does not amount to a breach of public policy’.
Thus, mere errors in the interpretation of the law or factual findings would not suffice to warrant refusal of enforcement under the public policy ground. The illegality of the award must reach a certain threshold such that enforcement of the same would be against the state’s fundamental tenets of justice and morality or would be blatantly injurious to the public or the interests of society.
The biggest challenge, however, that may be encountered by any prevailing party in the Philippine jurisdiction involves the filing of an enforcement claim against the state. In itself, litigating against the state already poses serious challenges. Enforcing against the state, however, is another matter. The rule is that
where the state gives its consent to be sued by private entities either by general or special law, it may limit [the] claimant’s action only up to the completion of proceedings anterior to the stage of execution and that the power of the Courts end when the judgment is rendered, since government funds and properties may not be seized under writs of execution or garnishment to satisfy such judgments, is based on obvious considerations of public policy. Disbursements of public funds must be covered by the corresponding appropriation as required by law. [119]
No less than section 29(1), article VI of the 1987 Philippine Constitution commands that ‘no money shall be paid out of the Treasury except in pursuance of appropriation made by law’.
The rule that government funds and properties may not be seized under writs of execution or garnishment is, in fact, embodied in Supreme Court Administrative Circular No. 10-2000, dated 25 October 2000. The same circular clarified, however, that only properties held for public use, and generally everything held for governmental purposes, are not subject to execution. Property held for public purposes is not subject to execution merely because it is temporarily used for private purposes. If the public use is wholly abandoned, such property becomes subject to execution.
The Commission on Audit (COA) has primary jurisdiction over money claims against the government or any of its subdivisions, agencies and instrumentalities. [120] Under section 1, rule VIII of the 2009 Revised Rules of Procedure for the Commission on Audit, a money claim against the government should be filed directly with the commission secretary. In Department of Environment and Natural Resources v United Planners Consultants, Inc, [121] the Supreme Court ruled that the primary jurisdiction of the COA over money claims against the government extends to confirmed arbitral awards. In University of the Philippines v Dizon, [122] the Supreme Court reiterated that the primary jurisdiction to examine, audit and settle all claims of any sort due from the government or any of its subdivisions, agencies and instrumentalities pertains to the Commission on Audit (COA). The Supreme Court determined that it was of no significance that a final and executory decision already validated the claim against a government instrumentality. In City of Caloocan v Allarde, [123] the Supreme Court emphasised that government funds may not be subject to garnishment or levy in the absence of a corresponding appropriation law. The immunity, however, of public funds from garnishment or levy does not apply where the funds sought to be levied are already allocated by law for the satisfaction of the money claim against the government.
No issues arises if there already exists an appropriation law to cover the prevailing party’s money claim or if the state willingly enacts such appropriation law. In the absence, however, of an appropriation law and should the state insist on not enacting one, is the prevailing party left without any recourse to seek enforcement and execution against the state? In a number of cases, [124] the Supreme Court ruled that the special remedy of mandamus may lie in order to compel the enactment and approval of the necessary appropriation law. It must be noted, however, that these cases involved an appropriation to be enacted by a city through an ordinance. One may question, nevertheless, the propriety of availing of mandamus in an enforcement claim against the national government as it may have constitutional underpinnings in light of a possible breach of the principle of separation of powers.
Conclusion
Despite the relative infancy of arbitration in the Philippines and the challenges in its continuing development, the increasing resort to arbitration by parties and practitioners, coupled with the state policy of promoting and encouraging the use of arbitration as implemented by the courts reveal a positive and vibrant outlook for the future.
Notes
[1] AM No. 07-11-08-SC.
[2] Circular No. 098-09.
[3] Section 25, RA 9285.
[4] Rule 2.4, Special ADR Rules.
[5] Rules 2.1 and 2.2, Special ADR Rules.
[6] Section 25, 40, and 46 of the ADR Act of 2004.
[7] Rules 3, 5, 7, 8, 9, 10, 11, 19.1, 19.2 and 19.26 of the Special ADR Rules.
[8] Rule 2.2, Special ADR Rules.
[9] Article 2035, New Civil Code of the Philippines and Section 6, RA 9285.
[10] Section 5, RA 876.
[11] Article 21, UNCITRAL Model Law.
[12] Section 6, RA 876.
[13] Article 4, UNCITRAL Model Law.
[14] Article 25, UNCITRAL Model Law.
[15] Rule 4, Special ADR Rules.
[16] Section 24, RA 9285.
[17] Section 7, RA 876.
[18] LM Power Engineering Corporation v Capitol Industrial Construction Groups, Inc, GR No. 141833, 26 March 2003.
[19] Rule 3.2, Special ADR Rules.
[20] Rule 3.3, Special ADR Rules.
[21] Rule 2.4, Special ADR Rules.
[22] Rule 3.12, Special ADR Rules.
[23] Rule 2.4 and 3.8, Special ADR Rules.
[24] Rule 3.18, Special ADR Rules.
[25] In domestic arbitration, section 10, RA 876 requires the following qualifications for arbitrator: they must be of legal age; in full enjoyment of his civil rights; and knows how to read and write. Section 10 likewise prohibits the appointment of an arbitrator who is related by blood or marriage within the sixth degree to either party to the controversy; has or has had financial, fiduciary or other interest in the controversy or cause to be decided or in the result of the proceeding; or has any personal bias, which might prejudice the right of any party to a fair and impartial award.
[26] Article 2045, Civil Code of the Philippines.
[27] Section 26, RA 9285.
[28] Rule 6.1, Special ADR Rules.
[29] Article 12(2), UNCITRAL Model Law.
[30] Rule 7.2, Special ADR Rules.
[31] Rule 8, Special ADR Rules.
[32] Rule 8.1 and 8.2, Special ADR Rules.
[33] Article 9.
[34] Section 28.
[35] GR No. 146717, 19 May 2006.
[36] Section 28(a), RA 9285; rule 5.2 and rule 5.15, Special ADR Rules.
[37] Section 28(b)(6) and section 29, RA 9285; rule 5.6(e) and rule 5.16, Special ADR Rules.
[38] Section 29, RA 9285.
[39] Article 17, UNCITRAL Model Law.
[40] Rule 5.4, Special ADR Rules.
[41] Rule 5.15, Special ADR Rules.
[42] Rule 5.13, Special ADR Rules.
[43] Rule 5.14, Special ADR Rules.
[44] Rule 2.3, Special ADR Rules.
[45] Rule 19 (2), UNCITRAL Model Law.
[46] Section 14, RA 876.
[47] Section 15, RA 876.
[48] Section 32, RA 9285, article 18, UNCITRAL Model Law.
[49] Section 20, RA 876.
[50] Article 31, UNCITRAL Model Law.
[51] Article 30, UNCITRAL Model Law.
[52] Section 20, RA 876.
[53] Section 32, RA 9285, otherwise known as the Alternative Dispute Resolution (ADR) Act of 2004; rule 2, section 1.6, D(9), Department of Justice Circular No. 98, Series of 2009, otherwise known as the Implementing Rules and Regulations of the Alternative Dispute Resolution (ADR) Act of 2004 define Domestic arbitration as arbitration that is not international as defined in article 1(3) of the Model Law. In turn, article 1(3) of the Model Law states:
an arbitration is international if : (a) the parties to an arbitration agreement have, at the time of the conclusion of that agreement, their places of business in different States, or (b) one of the following places is situated outside the State in which the parties have their places of business: (i) the place of arbitration, if determined in, or pursuant to, the arbitration agreement; (ii) any place where a substantial part of the obligations of the commercial relationship is to be performed or the place with which the subject-matter of the dispute is most closely connected; or (iii) the parties have expressly agreed that the subject-matter of the arbitration agreement relates to more than one country.
[54] SEC 33, Applicability to Domestic Arbitration, article 8, 10, 11, 12, 13, 14, 18 and 19 and 29 to 32 of the Model Law and section 22 to 31 of the preceding Chapter 4 shall apply to domestic arbitration.
[55] Section 23, RA 876.
[56] Rule 11. 2 (A), Special ADR Rules.
[57] Rule 11.2 (B), Special ADR Rules.
[58] Rule 11.2 (F), Special ADR Rules.
[59] Rule 11.4 (B), Special ADR Rules.
[60] Rule 11.2 (D), Special ADR Rules.
[61] Rule 11.2 (E), Special ADR Rules.
[62] Rule 11.5, Special ADR Rules.
[63] Rule 11.2 (C), Special ADR Rules.
[64] Rule 11.2 (D), Special ADR Rules.
[65] Rule 11.2 (E), Special ADR Rules.
[66] Section 24, RA 876.
[67] Rule 11.4. (A), Special ADR Rules.
[68] Rule 34, UNCITRAL Model Law.
[69] Rule 19.10, Special ADR Rules.
[70] Rule 11.4., Special ADR Rules.
[71] Rule 19.10, Special ADR Rules.
[72] Ibid.
[73] Section 17.1, Revised CIAC Rules of Procedure.
[74] Rule 18.1, Revised CIAC Rules of Procedure.
[75] Section 40, RA 876.
[76] Rule 18.2, Revised CIAC Rules of Procedure.
[77] The petition for review shall be filed before the Court of Appeals pursuant to rule 43 of the Rules of Court; section 3, rule 43 of the Rules of Court.
[78] Rule 18.4, Revised CIAC Rules of Procedure.
[79] Rule 18.5, Revised CIAC Rules of Procedure as amended by CIAC Res No. 07-2007.
[80] Rule 18.5, Revised CIAC Rules of Procedure as amended by CIAC Res No. 13-2007.
[81] Such petition to recognise and enforce or set aside, at the option of the petitioner, may be filed with the Regional Trial Court: where arbitration proceedings were conducted; where any of the assets to be attached or levied upon is located; where the act to be enjoined will be or is being performed; where any of the parties to arbitration resides or has its place of business; or in the National Capital Judicial Region.
[82] Rule 12.1, Special ADR Rules.
[83] Article 33 (1), UNCITRAL Model Law.
[84] Article 33 (3), UNCITRAL Model Law.
[85] Rule 12.2, Special ADR Rules.
[86] Ibid.
[87] Rule 12.4, Special ADR Rules.
[88] Article 34, UNCITRAL Model Law.
[89] Rule 12.4, Special ADR Rules.
[90] Rule 19.10, Special ADR Rules.
[91] Ibid.
[92] Section 42, RA 9285.
[93] Rule 13.2, Special ADR Rules.
[94] Rule 13.1, Special ADR Rules.
[95] Section 42, RA 9285.
[96] Article 1.6, C (5), IRR of the RA 9285.
[97] Article 1.6, C (10), IRR of the RA 9285.
[98] Section 43, RA 9285; Rule 13.4, Special ADR Rules.
[99] Rule 13.12, Special ADR Rules.
[100] Rule 19.11, Special ADR Rules.
[101] Rule 13.4, Special ADR Rules.
[102] Section 45, RA 9285; rules 13.6 and 13.7, Special ADR Rules.
[103] Rule 19.10, Special ADR Rules.
[104] Section 44, RA 9285.
[105] Rule 13.11, Special ADR Rules.
[106] Rule 19.7, Special ADR Rules.
[107] Rule 19.8, Special ADR Rules.
[108] GR No. 96283, 25 February 1992.
[109] Rule 12.12, Special ADR Rules; rule 11.9, Special ADR Rules.
[110] Rule 19.10, Special ADR Rules.
[111] Rule 12.13, Special ADR Rules.
[112] Rule 19.25, Special ADR Rules.
[113] Rule 19.36, Special ADR Rules.
[114] Rule 19.22, Special ADR Rules.
[115] Rule 21.6, Special ADR Rules.
[116] Rule 19.36(d), Special ADR Rules.
[117] Fruehauf Electronics Philippines Corporation v Technology Electronics Assembly and Management Pacific Corporation, GR No. 204197, 23 November 2016.
[118] GR No. 212734, 5 December 2018.
[119] Commissioner of Public Highways v San Diego, GR No. L-30098, 18 February 1970.
[120] Section 26, Presidential Decree No. 1445 otherwise known as the Government Auditing Code of the Philippines.
[121] GR No. 212081, 23 February 2015.
[122] GR No. 171182, 23 August 2012.
[123] GR No. 107271, 10 September 2003.
[124] Star Special Watchman and Detective Agency v Puerto Princesa City, GR No. 181792, 21 April 2014; Spouse Ortega v Cebu, GR No. 18156-63, 2 October 2009; Municipality of Makati v Court of Appeals, GR Nos. 89898-99, 1 October 1990.
Jan Vincent S Soliven
[email protected]